LONDON, April 29 (Reuters) - Electrification was the
greatest achievement of the 20th century, according to the U.S.
Academy of Engineering.

For people in North America and Europe, the availability of
power at the flick of a switch has become so commonplace it is
no longer remarkable.

But for 1.2 billion people in sub-Saharan Africa and
developing Asia, electricity was still a dream in 2011.

More than 300 million people in India were without access to
electricity, which the International Energy Agency defines as
consuming at least 250 kilowatt-hours per year for a rural
household and 500 kilowatt-hours for an urban one.

Nigeria, Indonesia, Ethiopia, Democratic Republic of Congo,
Bangladesh and Pakistan each had more than 50 million people
without power.

Another 43 nations, virtually all in sub-Saharan Africa, had
at least a million people with no electricity (link.reuters.com/jug88v).

But the big obstacle to electrification in Africa is not
constructing power stations and building overhead power lines.
It is working out how to help the region's households - many
with limited and irregular cash flows, little collateral and no
access to credit - to pay for the huge investment needed to
bring electricity to them.

ECONOMIC EXCLUSION

In March, an official from the U.S. Agency for International
Development (USAID) testified to the Senate Foreign Relations
Committee: "Over a year, a refrigerator uses six times more
electricity than a Tanzanian citizen, and it would take an
Ethiopian citizen two years to consume the amount of electricity
that an American does in three days."

He added: "Sub-Saharan Africa (excluding South Africa)
generates 28 gigawatts of power for more than 900 million people
- about the same as Argentina generates for 42 million people.
And on any given day, a quarter of that energy is unavailable
due to inefficient outdated infrastructure."

No electricity means no development. "Without electricity
they (the rural population) have no lights, and their children
must do their homework under dangerous paraffin lamps. Using a
computer for schoolwork or anything else is impossible,"
Symbion, an independent power producer, told the committee.

There is no refrigeration to preserve food and cooking is
done on wood- or dung-burning stoves that cause deforestation,
greenhouse emissions, and toxic fumes that are responsible for
an estimated 2 million premature deaths a year.

RURAL ELECTRIFICATION

Africa is rich in energy. There are enormous untapped
resources of gas, oil, coal, geothermal, solar and wind power
that could easily meet the region's requirements.

The usual problems of war, corruption, lack of investment,
poverty and the immense distances involved in bringing power to
remote rural communities have all contributed to the failure of
electrification.

More than half of urban dwellers in sub-Saharan Africa have
access to electricity, but the comparable figure for rural
communities is under 20 percent.

In that respect, the problem of bringing power to rural
Africa is no different from other parts of the world, including
the United States.

On the eve of the Great Depression, 44 percent of the U.S.
population was still rural, around 50 million people; almost
none had electricity. The federal government played a decisive
role in the 1930s in spreading power outside the cities through
New Deal agencies such as the Rural Electrification
Administration and the Tennessee Valley Authority.

Governments and international donors will have to play a
similar role in Africa. The biggest problem, however, is getting
people to pay for power.

Power stations, hydro dams, wind and solar farms, as well as
the transformers and overhead power lines that make up the grid,
are enormously expensive and require massive capital investment
up front that must be recovered over time from local utilities
and ultimately households and businesses.

CREDITWORTHINESS

In most countries, local or regional utilities pay for the
construction of generation and transmission assets, and then
recover the cost from their customers' bills. But in much of
Africa and Asia, utilities struggle to charge their customers
enough. Political interference prevents them from charging a
sufficiently high price to recover their costs, and non-payment
or late payment is endemic.

Even in areas served by power plants and distribution
systems, electricity theft and non-payment of bills are common.
In much of the region, communities lack the means or the credit
to make credible promises to pay the costs of installing new
generation and connecting them to the power supply.

Customers fail to pay utilities, which default on payments
to independent power producers and transmission operators, which
in turn default on their loans from project financiers.

The returns on rural electrification have been low and the
risks high. Symbion, the independent power producer, complained
to the Senate it was owed $70 million at the end of February by
utilities in one African country.

"This level of debt is simply unsustainable for a company of
our size. Whilst we have every confidence that the host
government will eventually pay us, the cash-flow problems that
the situation has created cause considerable disruption to our
operations," Symbion said.

"Not being paid on time or at all is at the top of the fear
list for the private sector."

Foreign investors remain wary. Africa attracted an average
of just $8.4 billion in foreign direct investment in utilities
in 2011 and 2012, according to the United Nations Conference on
Trade and Development's "World Investment Report 2013". That
figure, which includes gas and water as well as electricity and
is for the whole continent, is woefully inadequate.

POWER AFRICA INITIATIVE

The Obama administration is trying to promote a more
coordinated approach while boosting exports for U.S.
construction firms and equipment manufacturers. The Power Africa
Initiative, launched last summer, aims to install 10,000
megawatts of new generation capacity, connect 20 million new
customers, and improve electric reliability across the
continent.

Six countries (Ethiopia, Kenya, Tanzania, Ghana, Liberia and
Nigeria) have been selected to participate in the first phase
but the administration hopes to add more over time.

USAID, as well as the Export-Import Bank of the United
States, the Overseas Private Investment Corporation (OPIC) and
U.S. representatives at the multilateral development banks have
been instructed to make electrification projects a priority.

U.S. lawmakers have proposed an Electrify Africa Act (HR
2548), a largely symbolic piece of legislation that would
declare it the policy of the United States to encourage
electrification in Africa and instruct the U.S. Treasury and
other agencies to prioritise electrification funding.

The aim of these programmes is to use government funding,
loan guarantees and diplomatic backing to encourage greater
investment from the private sector. But unless the payment and
credit problem can be resolved, electrification is unlikely to
make much progress.

GOING OFF GRID

One solution is to encourage off-grid and community-based
generation. Small-scale local projects require less capital up
front. They may be more suited to rural communities. There are
no expensive high-voltage transmission networks to build. And
the problems with grid management and control can be avoided.

Crucially, micro-generation projects may be able to avoid
some of the payment and credit problems, as well as the
political interference and corruption, that bedevil large-scale
centralised generation and transmission systems.

"Decentralised off-grid and mini-grid solutions often offer
the swiftest, cleanest and most innovative solutions to energy
poverty by sidestepping the need to connect to the national
electricity network," USAID said.

The aim is to tie payment closely and visibly to
consumption. Many rural communities already have some form of
mobile phone service. Mobiles avoid the problems of laying
expensive fixed lines and trying to recover the costs from
subscribers; users are charged on pay-as-you-go plans.

In Kenya, USAID is backing several innovative projects
including a pay-as-you-go lighting service, and a metered solar
power and battery system. In Tanzania, OPIC is funding software
that will allow customers to pre-pay for electricity via their
mobile phone.

In the cities, Africa needs more central generating and
transmission capacity. However, extending the power grid to
rural areas is probably uneconomic, and off-grid and micro-grid
solutions make more sense.
(Editing by Dale Hudson)